9:21 AM, 24th February 2014, About 8 years ago 5
I am exploring ways to share the wealth and minimise CGT and IHT
I hold a profitable portfolio of some 18 investment properties…
More than half were purchased in 1997.
Most have appreciated in capital value.
The rental stream gives a net profit in excess of £75,000 pa
About two years ago I purchased a residential property using an interest only BTL mortgage
The property is let to my son and his wife on an AST.
They effectively pay the Mortgage…
However in the books we receive an economic market rent from them….
I pay them back the difference between mortgage and the market rent as a monthly payment to top up their cash flow.
I refurbished the property prior to renting, spending in excess of £100,000.
The money spent was allowed by my accountant mainly as revenue expense and as such has not increased the book value of the property for CGT purposes.
The revenue expense is being offset against the significant rental income….
I funded the deposit of some 40%.
The property has appreciated in value significantly beyond the purchase price PLUS refurbishment costs by another £100,000 – yes the property is in London.
My plan was to sell the property to my son and his wife after the initial two year fixed period when there is no penalty for Redemption. The selling price would be the purchase price plus a notional increase within our CGT Allowance.
The actual amount we would receive net being the redemption cost of the BTL mortgage…
Are you still with me?
So I am in fact gifting the deposit, plus the refurbishment costs, plus the significant increase in property value…
Yes but being ‘his father’s son’, he has asked whether there is a better way…???
1. To avoid SDLT…
2. Can I gift the property to them?
3. Can they then loan me the money to effectively repay the BTL loan?
Thus having a significant charge on my estate upon my demise…
I am currently married.
Possibility of a divorce in near future.
The portfolio including the property in question is owned in equal share.
I would like to tidy this up before any separation or divorce proceedings are started.
Quite a complex scenario….
Views , opinions and FACTS would be welcomed.
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